“How South African SMEs could escape ‘the heavyweight knockouts’!”

Small and medium enterprises (SMEs), which, over the years, were in charge of supplying goods to rural areas and townships, are fast losing markets to large business. Modern customers want value-for-money through high-quality products at low prices, greater convenience, and a wide range of choices. Large enterprises are capable of meeting these demands. Hence, they have a competitive advantage over the SMEs. In addition, large corporations can deliver the convenience of one-stop-shopping. This paper exposes SMEs options useful for offseting the might of large business. It highlights the available routes for strength creation. One option is to step aside temporarily while running the SMEs, but preparing fully for future competition. Another option is to fill the gaps left by large companies while preparing to contest face-to-face. Recommendations are that SMEs should exploit available empowerment opportunities and, then, use methods of advantage to work in the presence of large businesses. SMEs can delay direct competition until the time is right.


Introduction
Before 1994 in South Africa, rural and township businesses were mostly locally-owned small and medium enterprises (SMEs). After the dawn of democracy though, there has been exponential multiplication of large and small businesses. Among the large ones, multinational enterprises (MNEs) and franchises of all forms mushroom all over, mainly in the shopping malls. In residential areas, there has been emergence of more SMEs, some that are locally owned and others that are foreign owned. The villages/rural locations and townships were unfamiliar scenes for MNEs. These explosive growths were expected to improve the economic and social outlook of South Africa. A common observation, however, is that in every part of South Africa, foreignowned and MNEs are heavily threatening the existence of locally-owned SMEs.

Competition and other threats of locallyowned SMEs.
Competition is a business aspect globally (Porter, 2008). The locally-owned SMEs face a threat of competition from foreign-owned SMEs, large MNEs and other mass merchandisers. Other threats originate from the fluctuating demographics of consumers, and the unstable consumer purchasing patterns. These coerce locally-owned SMEs to review their business operations. These SMEs are urged to modify their business strategies and models. Modern consumers use shopping malls, because they want shopping value, choices, convenient shopping locations, extended business hours, the convenience of one-stop shopping, a problemfree shopping environment, and a friendly personal touch in a clean, fun place to shop (Seeletse, 2015). These trading variations have increased the options accessible to the typical consumer at the expense of the SMEs, particularly the locally-owned ones. Indications are that business will never be the same. Before these changes, there were many opportunities for local SMEs in modern economy.
Strategic options in locally-owned SMEs are used in the modern shopping phenomenon due to the entrance of foreign-owned SMEs, MNEs and franchises, among other competitors. Maesela, Hungwe and Seeletse (2016) showed that foreign-owned SMEs have challenged locally-owned ones. In some cases, they displace locally-owned ones from their markets. The paper addresses the research support for each strategy, and discusses how locally-owned SMEs could react.

Large and multinational enterprises.
The overall impact of MNEs, large franchise retailers and foreign-owned SMEs, among other arriving competitors, on locally-owned traditional SMEs has yet to be fully explored and evaluated. The literature on the MNEs and franchises phenomenon focuses sizeably on the negative impacts of mass merchandisers and discounters on local retailers and the local economy (Haig, 2011;Whitley, 2002). Secondly, there is substantial consideration from research and the media (Tomiura, 2007). The presence of newcomers such as large discounters and foreign-owned SMEs disturbs the traditional retailing patterns, especially of the locally-owned SMEs (Freel, 2006). This emerging competition of large retailers intensifies the overall competitiveness of the local retail marketplace, and also displays a pull-factor by attracting consumers from surrounding communities (Peterson & McGee, 2000). The paper also explores the reactions of locally-owned SMEs to the entry of the various competitors into their markets. This stream examined the strategies and typical competencies of SMEs, as they reacted to variations in their markets. The focus of this paper is on this latter stream of research.
The new competition has forged the development of discounters into local markets. Through a mixture of forceful pricing and innovative inventory-control systems, franchises and MNEs have displaced competition to their favor. They have succeeded as giant buyers by negotiating the best wholesale prices, while offering customers the lowest prices and making up the differences in volume (Tsao, 2002(Tsao, , 2003. On the other hand, traditional SMEs struggle to compete at large levels of economies of scale and scope. Consequently, according to Peterson and McGee (2000), many independent SMEs, when faced with the entry of ruthless competitors, are forced to adjust hurriedly in order to avoid guaranteed bankruptcy. Taylor and Archer (1994) outlined eight success factors of successful discounters. 7. Customers are generally sensitive. Most customers do not want to be annoyed, do not like to argue, and will even walk away instead of complaining. This hassle is one of the most common provoking to customer, which bothers small businesses, but most big businesses have either alleviated it or have professional approaches to address it when it occurs. 8. Customers prefer a friendly personal touch in a clean, fun place to shop. They appreciate a personal touch.

Business management success factors.
The traditional SMEs wishing to improve any of these factors are thus, bound to increase their competitiveness before they can have a better chance to survive. Some of the crucial factors are expensive and cannot suit SMEs. Hence, the SMEs cannot compete with big business using most of Taylor and Archer's guidelines. SMEs have a definite advantage with regard to factor 8. Factor 8 is much more common for SME employees to remember customers and to possess extensive product knowledge. They sometimes even know their timetable for buying certain items and even reserve these items for them.

Business strategy options.
Porter (2008) counsels that organizations could pursue at least one generic business level strategy, such as either low cost leadership or differentiation. The low-cost leadership strategy transforms into a business attempt to become the low cost producer/provider in a market or industry. Common supermarkets' operations are aligned to providing the customer requiring low prices. These new competitors are generally succeeding on providing low prices and one-stop shopping. However, they give up some factors offered by local SMEs. These are the high degree of personal attention, and store environment and the reality of credit due to being neighborly, among others. According to Brennan and Lundsten (2000), this strategy could be based on a perception of image, or exclusivity due to high quality or unique products or superior customer service. Differentiation, ultimately, aims to create brand loyalty and price inelasticity. Often, companies adopt a differentiation strategy in order to mould their business models toward a specific market segment, often engaging in specialty shops. Differentiation strategies enable companies to increase value in the minds of their customers using methods such as the availability of exclusive brands, engorged customer service, or an exceptional shopping experience. have been done in South Africa on SMEs, and have found common problems. These common problems are the main reasons for SME failure in South Africa, which is the AS-IS actuality. The AS-IS collective show that failing SMEs' lack training in business skills and knowledge. This deficiency confines the SME owners and their employees to follow same methods and provide the same products in the same way all the time. They cannot find something surprising, exciting, or delighting to their customers. As a result, they cannot form loyalty for their customers. These owners tend to lack an understanding of customer service.
Many SMEs are not reliable as when they miss promises, they do not even realize the level of inconvenience it may cause, and the time they waste for customers. Also, when they deal, they do not monitor their work, which prevents tracking of their progress. Where the SMEs have employees, most of the employees do not know about promoting a business or a product. The owners and managers also fail to keep the employees informed. The SME owners want to do things themselves even when they can delegate, mainly because often they feel superior when they are visible. Due to the workload, many of SME owners are inaccessible, inefficient and lack resourcefulness for their SMEs, among others. The general summary is that these SMEs fail, because they are incapable, and can become successful if they can become capable.
In addition, the SMEs do not want to spend, because they consider spending as waste. They also believe that SMEs avoid paying tax, investing, accounting truthfully, and would rather prefer to obtain donations. This mentality is also a cause for failure to invest on development of their SMEs. The South African SME AS-IS situation is explained by the descriptions of SME limitations above, and the TO-BE is the opposite of these factors. In order to show how the envisaged TO-BE can be effected, the next discussion explains the platforms for the changes.

South
Africa SME options. This paper focuses on South African SMEs that are legally registered and intending to contribute to community development and the economy. These formal structures and options can elevate SMEs to escape from the described AS-IS situation in order to reach the envisaged levels. South Africa has the Small Enterprise Development Agency (SEDA), which is an agency for developing SMEs with regard to any problem or developmental aspect of business (SEDA, 2015). They nurture and also fund the SMEs until they can be able to offset their weaknesses. SEDA also has high impact programmes (HIPs) which are used to develop any form of SMEs.
SEDA development services encourage employment in SMEs. The programmes can be easily accessed for struggling SMEs that formally apply, disclosing their needs and also pledging to employ community members. SEDA evaluates each submitted application, and, then, places deserving and qualifying SMEs under relevant programes. Participating SMEs have shown to excel, but the application rate is low among struggling SMEs. SMEs should pledge quality in their operations. They should also plan to constantly monitor their performances. They can ensure customer service quality by conducting customer service audits.

Proposal for SMEs. South African
Also, communication and awareness should be integrated in the SME operations. The employees should be kept informed, and always be made aware of SME developments.
Skilful and respectable employees can surprise, excite and delight customers. Trained and experienced employees could be allowed to go out of their way to help a customer to build customer loyalty. Also, customer service can be made every employee's job when trained.
Once these have occurred, then, the SMEs could apply to SEDA for training of its managers and its employees. When placed on programmes, the SMEs should take time off from the SME operations to complete the training and only return to the SMEs when advised by their SEDA guides.
3.2. SME "TO-BE" practices. These are the envisaged practices anticipated for a skilled SME management. After completing empowerment programs, SMEs should approach the business differently, and be viewed as such by the customers. They should be reliable, and should keep their promises. They are advised to make promises only when they can deliver on the promises, but are more advised to promise minimally while delivering more than customer expectations.
The SMEs are also encouraged to be pragmatic, and humble. They should express regret when wrong, and also explain the planned corrective action. They should also acknowledge their limitations where they fall short. They should interact by learning customer names. Using names to call customers can create relationships of trust.
The SME owners should be able to thank employees and customers. Owners and employees should be polite, friendly, and welcoming. If the role players are made to feel valued, they can contribute to justify that evaluation.
The SMEs should be efficient in their operations. They should also value the time of their customers. Signs of SME growth appear when employees play a greater role. Thus, when they have been trained, employees should be given some authority to solve problems. Owners need to delegate some tasks, and also to train employees to participate at responsible levels. It is also important for owner managers to be accessible. In the case of South African laws, as Schall and McFarland-Whisman (2009) advise, SME owners are urged also to equip their SMEs with facilities where possible, to allow easy entry of people with various forms of disabilities.
Lastly, in competing against big business, SMEs could still compete on business aspects, where they cannot match big business, such as price. Approaches could be negotiating with suppliers on prices over a long term period, or partner with other SMEs, where immediate bulk purchases are the only option to secure reduction of prices. However, they should strive to get the same quality as the large businesses. Also, the SMEs have the advantage of closeness to the markets in their locations/localities. SMEs can, therefore, market themselves on transport price exclusions, and can even make free deliveries to the customers. Given the crime realities of South Africa, these SMEs should still ensure that investing on security may be a requirement when such initiatives are made. Where there are alternatives, SMEs should be assertive in rendering their existence beneficial to competition and to their effectiveness.

Some statistical facts about South African SMEs
The section establishes if the various SMEs apply financial aids equally in the locations. The tests are used to determine if locations have equal SMEs, if uses of financial aids were common in locations and whether use of the aids depended on the location of the SME. All the tests were conducted at the 5% level of significance.  This ANOVA determines if the financial aids were used equally. The critical value for the test is F crit = 3.2389. The test statistic is F = 1.1161, which is outside the critical region. This is an indication that at the 5% significance level there is not enough statistical evidence to suggest that the SMEs used financial aids differently.
The next test determines if use of financial aids is dependent on geographical dispersion. Let ij o be the observed frequencies (Table 1) and ij e the expected frequencies of the SMEs based on the null hypothesis. Curwin and Slater (2002) provide the general chi-square statistic to be used in this test as  Calculation of chi-square statistic gives 6 . 15077320 2 . The degrees of freedom (d.f.) for this contingency table is (rows-1)(columns-1) = (3)(4) = 12. At the 5% level of significance, the critical value is 21.03. Since the test statistic exceeds the critical region, the null hypothesis of independence should be rejected. Thus, at the 5% level of significance, there is enough statistical evidence that usage of financial aids by the SMEs depends on the SMEs' geographical location.

Discussion
This paper supports the SEDA option for SME to solicit help. However, the arguments suggest that SMEs that do not have the vision to contribute to the economy should not be assisted. If assisted, such efforts would be close to wasting resources needed for communal programs. In the case where SMEs apply without such a vision though, instead of being refused help, they can be assisted to share the vision. Only when they are ready, then, they should be assisted through SEDA or similar programs.
The proposition to suspend struggling SME operations when engaging with SEDA is to reduce risks of a further decline due to swayed focus, unless a SEDA guide proposes to use the SME in the training. The SMEs and their personnel should acquire every necessary business skill and knowledge they may need in business before they operate. If they can insist on working, it may be the skill they have not acquired that is essential when they enquire challenges.
Also, the SMEs should be made fully aware of the problems listed as causes of failure of SMEs. They should be encouraged to be innovative and being on the lookout for more risks in their businesses. Their skills should be used in a joint effort to alleviate and mitigate the challenges. This is one reason for communication and awareness of employees about their SMEs.
SMEs have great potential for economic development. Then, nurturing SMEs is an essential and dynamic milestone in economic development. SEDA was established by government to fill a gap in the vision of enabling SMEs to contribute to economic development as global trends attest. The SMEs are being encouraged to use government resources as much as possible to grow, mature and, thrive, and thereafter, pay back to the country's economy.

Recommendations
SMEs should not bluntly shy away from the threat of competition from large companies. They should assess their strengths and weaknesses. They need to commit to a competitive strategy that focuses on SME-specific competencies. Sometimes, the SMEs can benefit by delaying to compete against the large companies. If delaying can be beneficial to SMEs and/or communities, this should be highly considered. When it becomes necessary to contest, the paper recommends that SMEs should: decide whether it is necessary to contest directly against large businesses or to fill a gap remaining; embark on empowerment initiatives to ensure that they understand business and management; focus on augmenting their strengths and reducing their weaknesses in business; use acquired skills to withstand the might of large business if necessary; employ differentiation strategies available when competing; exploit available empowerment opportunities such as SEDA services; and the SMEs should be empowered to use financial (and other business) aids in all locations.

Conclusion
SMEs should not evade the threat or might of competition from large companies. They have their own strengths. Hence, they should assess their strengths and weaknesses and use them to strategize. They need to commit to a competitive strategy that focuses on SME-specific competencies. SMEs could use differentiation by following strengths such as customer service and superior product knowledge. Differentiation provides a means for SMEs to compete with large business. SMEs should, therefore, provide value-added differentiation to customers in the form of higher-quality goods at competitive prices.
SMEs can also find innovative ways to compete with large companies on price. They have globally managed to grow fastest among businesses, such as in America and China. Those SMEs were successful in challenging large businesses on their ability to offer lower prices and offering greater convenience. These are large businesses' core competencies which gave them competitive advantage, but SMEs exploited them and won.
Therefore, for SMEs to rise and compete with large businesses, they should adapt to a fast-changing business environment by providing high-quality products at low prices, greater convenience, and a wide mix of goods. Modern locally-owned SMEs are coming to grips with the demands of their external environment.